The following forecasted sales pertain to Nyak Company: Collection pattern:
60% in month of sale
40% in month following the sale
$\begin{array}{lr}\text { Month}&\text { Sales }\
\text { April } & \$ 200,000 \
\text { May } & 250,000 \
\text { June } & 150,000 \
\text { July } & 100,000
\end{array}$ The company has a selling price of $10 per unit and expects to maintain ending inventories equal to 20% of the next month's sales.How many units are expected to be produced in April?
$\begin{array}{lr}
\text { Accounts receivable as of March } 31 & \$ 35,000 \
\text { Finished goods inventory as of March } 31 & 4,000 \text { units }
\end{array}$

Question

Quizplus · Accepted Answer

To calculate the units to be produced in April, first determine the sales in units for April, which is $200,000 / $10 = 20,000 units. The ending inventory for April should be 20% of May's sales in units, which is $250,000 / $10 = 25,000 units, so 20% of 25,000 is 5,000 units. The beginning inventory is 4,000 units. Therefore, the units to be produced in April = (April sales in units + ending inventory for April) - beginning inventory = (20,000 + 5,000) - 4,000 = 21,000 units.

The Following Forecasted Sales Pertain to Nyak Company: Collection Pattern